Mercer Island Reporter

Letter | Gov. Inslee's budget proposal filled with new taxes

April 8, 2013 · 11:33 AM Comments

Despite his campaign claims that he would not increase or create new taxes and the claim that Gov. Inslee's recently released 2013-2015 budget proposal does not include new taxes or tax increases and only includes "extensions" for existing taxes or "repeals" of tax breaks, the truth is quite the opposite.

Gov. Inslee's budget proposal is filled with new taxation, and is coming at a most unwelcome time in our nascent economic recovery.

The recently passed Senate budget plan meets the state Supreme Court mandate to fund education (as does Inslee's plan), but does so without tax increases. The Senate plan is a bipartisan effort (31 Republicans, 18 Democrats) to meet funding needs without raising taxes — a laudable effort in these ever-more-bipartisan days.

Gov. Inslee's plan includes a broad set of new taxes for us all to pay — here are some examples:

• New Business & Occupation (B&O) tax on boat moorage slips, mini-storage facilities and apartments (also covers airplane hangars) — and commercial real estate — anytime the rental is longer than 30 days. This isn't a "repeal" as Inslee would like you to believe — in fact, the Legislature tried to apply this tax to real estate in 1959; it took a court case in 1960 to rule the tax an unconstitutional non-uniform property tax. But Inslee likes it.

• A new 50 cent tax on small brewers — the tax exists today but only on large brewers, and is set to expire in June. Inslee wants the tax to continue for large brewers, but he wants to add it as a new tax to small brewers, too. Another new tax. Small brewers are one of Washington's bright spots — let's not dampen their competitiveness with a new tax.

• Add sales tax to custom software sales. This hits small businesses that create custom software for their clients who don't have the expertise in-house to modify large-scale software from big companies like SAP, Oracle and Microsoft. Again, Inslee claims that this is a "repeal" of a tax break, when in fact custom software writing is a service business subject to B&O tax like any other service business, and like those businesses has never been subject to sales tax.

• Residential phone service — Inslee wants to add sales tax to your phone bill for the core service. He argues that since cellular and VOIP services pay sales tax, landline core service should also pay. This is another new tax that Inslee is trying to characterize as a "repeal" — even though core phone service has been exempted from sales tax (for good reasons) since 1983. In fact, the Dept. of Revenue is currently facing a court challenge for applying the sales tax to cellular and VOIP service.

• Bottled water — like most food products — doesn’t incur the cost of sales tax. Inslee wants to add bottled water to the list of food products that carry sales tax. He calls this “removing an exemption,” but it’s actually an effort to go against the will of Washington voters, who explicitly removed sales tax from bottled water when they passed Initiative 1107 in 2010.

The bottom line is that Gov. Inslee’s budget proposal is filled with new taxes that he and his team are careful to characterize otherwise. Don’t be fooled.

You can read Inslee’s carefully worded high-level overview at www.ofm.wa.gov/budget13inslee/default.asp, with more specific details at www.ofm.wa.gov/budget13inslee/tax_exemption_factsheets.pdf. A savvy reader will see the reality is that he is proposing many new taxes.

I, for one, am writing my House representatives and encouraging them to support the bipartisan budget proposal that the state Senate just passed. It funds education as required by the state Supreme Court, and doesn’t include a raft of new taxes. I encourage you to do the same.